£12,500 Personal Loan over 4 years: what it costs each month
What a £12,500 personal loan over 4 years costs at different rates
The rate you are offered depends on your credit score, your income and how much you borrow. The same £12,500 over 4 years can cost very different amounts, so it is worth seeing the whole range before you apply.
Moving the rate by one percentage point, from 9.9% to 10.9%, changes the monthly payment by about £5.48 and the total interest by about £263.
£12,500 over 4 years by interest rate
| APR | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 5.9% | £292.11 | £1,521 | £14,021 |
| 7.9% | £302.98 | £2,043 | £14,543 |
| 9.9% | £313.90 | £2,567 | £15,067 |
| 14.9% | £341.39 | £3,887 | £16,387 |
| 19.9% | £369.06 | £5,215 | £17,715 |
| 24.9% | £396.83 | £6,548 | £19,048 |
Fixed rate, equal monthly payments, no fees.
The formula behind the payment
The payment on a fixed-rate loan is: amount × monthly rate ÷ (1 − (1 + monthly rate)−months). For £12,500 over 48 months at 9.9% APR the monthly rate is 0.7898%, which gives £313.90. Multiplying by 48 months gives £15,067 repaid in total, so the cost of borrowing is £2,567.
Should you borrow £12,500 over 4 years or a different term?
A longer term lowers the monthly payment but you pay interest for longer. At 9.9% APR, repaying £12,500 over 1 year costs £1,095.91 a month and £651 in interest, while 7 years costs £204.15 a month and £4,649 in interest. That is £3,998 more for the lower payment.
£12,500 at 9.9% APR by term
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 1 year | £1,095.91 | £651 | £13,151 |
| 2 years | £573.80 | £1,271 | £13,771 |
| 3 years | £400.28 | £1,910 | £14,410 |
| 4 years | £313.90 | £2,567 | £15,067 |
| 5 years | £262.38 | £3,243 | £15,743 |
| 7 years | £204.15 | £4,649 | £17,149 |
Interest versus capital: where your payments go
Early payments are mostly interest. In year 1 of this £12,500 loan, £1,069 of your £3,767 goes on interest and £2,697 reduces what you owe. By the last year the split reverses, which is why paying off a loan early saves more in the early years than the later ones.
£12,500 at 9.9% APR over 4 years
| Year | Interest paid | Capital repaid | Balance left |
|---|---|---|---|
| 1 | £1,069 | £2,697 | £9,803 |
| 2 | £802 | £2,964 | £6,838 |
| 3 | £509 | £3,258 | £3,580 |
| 4 | £186 | £3,580 | £0 |
Totals for each year of the loan.
What happens if you overpay your £12,500 loan?
Paying a little extra each month cuts the balance faster, so less interest is charged. Check that your lender allows overpayments and whether there is a charge: many allow up to a set amount a year without one.
Overpaying a £12,500 loan at 9.9% APR
| Extra payment | New monthly payment | Loan cleared in | Interest saved |
|---|---|---|---|
| +£30 a month | £343.90 | 44 months | £275 |
| +£60 a month | £373.90 | 39 months | £496 |
| +£120 a month | £433.90 | 33 months | £828 |
Compared with the normal 4 years term. Fixed rate, no fees.
How to work out if the payment is affordable
A common check is to keep all debt repayments, including this personal loan, below about a third of your take-home pay. A £313.90 payment fits that guide if your monthly take-home pay is at least £942.
Also look at what happens if your income drops. Choose a payment you could still make for several months without borrowing again.
UK rules worth knowing before you borrow
- Use an eligibility checker first. A "soft search" shows likely offers without leaving a mark on your credit file, while a full application leaves a hard search.
- The advertised "representative APR" only has to be offered to at least half of the people who are accepted, so your own rate can be higher.
- You have a right to repay a loan early. The lender can charge a limited amount of interest for doing so, so check the early repayment terms.
- Free, impartial help with debts is available from MoneyHelper, Citizens Advice, StepChange and PayPlan.
Ways to pay less interest
- Pick the shortest term whose monthly payment you can comfortably afford. Going from 7 years to 1 year would save £3,998 on this loan.
- Improve your credit file before you apply: register on the electoral roll, correct errors and pay existing bills on time.
- Make extra payments when you can, as long as there is no penalty. Each extra payment cuts the balance that interest is charged on.
- Borrow only what you need: every extra £1,000 at 9.9% over 4 years adds about £25.11 to the monthly payment.
Sources and further reading
Questions people ask
How much is a £12,500 personal loan per month over 4 years?
How much interest will I pay on £12,500 over 4 years?
Is it cheaper to borrow £12,500 over a shorter time?
What income do I need for a £12,500 personal loan?
Does this calculator include fees?
Results are estimates for information only, not financial advice. Read the full disclaimer.